No Fear at the Top Over the Next Recession

Recessions are simply a short intake-of-breath for the rich

and there’s a reason why.

They invented a heads-I-win,

tails-you-lose economic environment when we weren’t looking. It’s the

nearest we ever came to alchemy—the turning of base metals into gold.

Let me explain.

In a recession—or even a major

crash—two things happen.

1.  Things

lose their value. Stuff like houses and cars and shoes for your kids are

cheaper.

2.  Money

doesn’t do that. Money increases in value. The cash you stashed under

the bed, because you didn’t trust the banks, will buy more after a

recession.

But you and I, along with other

ordinary folk aren’t able to buy more, because our beds have feathers

inside, so it doesn’t help us. We’re having trouble enough paying the mortgage

and keeping our kids in school.

But the rich, the wealthy, whatever you choose to call those

dudes at the top, have lots of money—or access to it, which is pretty

much the same thing.

Those in this favored class always

buy heavily when a market bottoms out and if you own real-estate or heavy

machinery, there’s no better time to buy more. Recessions bring enormous

amounts of goods at auction and lots of good stuff is on the block, from

private jets to underwear.

Here’s another interesting thing.

Warren Buffet’s been recently criticized for hanging on to $122 billion in cash

at Berkshire Hathaway rather than investing it. My take on it is he sees a

serious recession coming on and, unsure of its timing, is holding on to the

dough. If things are worth less and money is worth more, he’s

simply patiently waiting, like a frog on a lily-pond that knows a big bug will

soon come along.

So the Dow Jones keeps going up and the banks announce

record earnings, because it’s not their money they’re playing with.

After all, what happened the last time? Those on the bottom lost their homes and

jobs, while those on top played various versions of “Happy Days are Here

Again.”

No hedge-fund manager or bank CEO is going to lose his

multi-million dollar a year job, so you’re not likely to find much panic in

that rarified atmosphere.

Too big to fail finally has a corollary…

…it’s called too rich to fail.